Top Three Energy Shares to Invest in as 2024 Approaches Its Finale
Energy stocks are having a solid run this year. The average one in the S&P 500 was up 14% heading into the year's final month, despite oil and gas prices being weaker. This underperformance against the S&P 500 is still a commendable feat, given the market conditions.
Looking forward to 2025 and beyond, energy demand is expected to continue growing. This means several energy stocks still present appealing long-term investment opportunities as we close out 2024. Notable mentions include Black Hills (BKH), Western Midstream Partners (WES), and Brookfield Renewable (BEP, BEPC).
A Sleepwell Stock with a High Yield
Reuben Gregg Brewer, a Fool.com contributor, points out Black Hills as a standout pick. This regulated natural gas and electric utility has served 1.3 million customers in various states for years, consistently delivering reliable energy. Its consistent dividend increases for 54 consecutive years and paying one for 82 years in a row make it part of the Dividend Kings elite list.
The utility boasts an investment-grade-rated balance sheet and $4.3 billion in capital spending plans, ensuring it can support its growth ambitions. Additionally, its investment plans, such as modernization, integrity efforts, and capacity developments, align with regulators' preferences. The cherry on top? A historically high 4% dividend yield, well above the S&P 500 and average utility yields.
A MLP Offering Strong Returns and Tax Advantages
Matt DiLallo highlights Western Midstream Partners' performance this year. The master limited partnership (MLP) is on pace to grow its adjusted EBITDA by 11% and free cash flow by 19%, boosting its financial strength and distributional plans. With a leveraged ratio of 3.0 times and increasing free cash flow, Western Midstream is poised for continued growth in the coming years.
The company plans to spend $700 million to $850 million on capital projects, enhancing its ability to grow its cash flow. It also maintains financial flexibility to make accretive acquisitions or repurchase units, further strengthening its value proposition.
With a high yield and tax advantages, Western Midstream is an excellent option for those comfortable investing in an MLP that sends a K-1 federal tax form each year.
A Renewable Energy Stock Positioned for Growth
Neha Chamaria singles out Brookfield Renewable as an investment to watch out for in 2025. The company is on track to deliver record-breaking funds from operations (FFO) growth and boasts a robust asset recycling strategy, supporting its growth objectives and generating significant returns.
Brookfield Renewable has targeted 10%+ FFO per-unit growth for 2024 and aims to invest $8 billion to $9 billion in various renewable energy projects over the next five years. Committed to its core renewable energy assets and strategic asset recycling initiatives, Brookfield is well-positioned to capitalize on the growing demand for power and provide attractive returns to shareholders.
Overall, Black Hills Corp., Western Midstream Partners, and Brookfield Renewable present compelling long-term investment opportunities due to their solid growth prospects and attractive dividend yields. Researching these companies further and considering individual risk tolerances and investment objectives is essential before making investment decisions.
In light of the expectations for continued energy demand, investing in energy stocks like Black Hills (BKH) could yield satisfactory returns over the next few years. Its consistent dividend increase history and high yield make it an attractive choice for income-focused investors.
Furthermore, for investors comfortable with MLP investments, Western Midstream Partners (WES) presents a strong option, offering promising growth potential and tax advantages with its K-1 form.
